HKMA's Perspectives on Fintech Development Mr LI Shu-Pui Executive Director Financial Infrastructure Department Hong Kong Monetary Authority 30 September 2016
Agenda Development of Fintech in Hong Kong HKMA’s Supervisory Approach Past Initiatives HKMA Fintech Facilitation Office and New Initiatives 2
Development of Fintech in Hong Kong 2015 Fintech Investment Interest in Fintech development continues to be robust in Asia 19% Asia In 2015, Fintech investment in Asia amounted to US$4.3 billion, accounting for 19% of global Fintech investment Other In Q1 2016, Fintech investment in Asia amounted to US$2.7 billion, regions 81% more than 5x compared to the amount in Q1 2015 Distributed Big Data The free market environment of Hong Kong is conducive to the ledger Analytics development of Fintech Artificial 48 out of 100 top Fintech companies in the world operate in the city Intelligence Mobile payment and biometric authentication are on the rise Paypass, PayWave and ApplePay are getting increasingly popular Biometric authentication will be adopted by major banks soon 3
HKMA’s supervisory approach Risk-based and technology-neutral Development of regulatory framework based on the intrinsic characteristics of the financial activities or transactions, and the risks arising from them No undue exemptions or requirements on the usage of novel technological applications Key success factors for facilitating Fintech development Our willingness to learn and understand Fintech Our ability to maintain close contact with the industry and other key stakeholders Our ability to achieve a good balance between market development and user protection 4
Previous Initiatives Near field communication e-Cheque 2012 Q3 Commenced NFC study 2015 Q4 Launched e-Cheque services in HK Launched the cross border 2013 Q1 Formulated development strategy 2016 Jul e-Cheque clearing facility with Guangdong Province (including Shenzhen) Developed a set of best practices for 2016 Aug Aggregated transaction amount: 2013 Q4 the development of NFC mobile HK$6.2 billion payment services Aggregated number of e-cheques issued: 191,300 5
Previous Initiatives (con’t) Stored value facilities (SVF) Passed the Payment Systems and Stored Value Facilities Ordinance 2015 Q4 (PSSVFO) to provide a regulatory framework for payment services including Fintech products Prospective applicants profile: Background : 55% Local; 25% Mainland; 20% Overseas Products or Services: 33% Internet/mobile payment businesses; 66% prepaid cards issuance businesses Current status: 70% existing local SVFs operators; 30% new market entrants 2016 Q3 5 SVF licences issued: Alipay Financial Services (HK) Limited ; HKT Payment Limited ; Money Data Limited ; TNG(Asia) Limited ; Octopus Cards Limited More will be issued later 2016 Q4 The 1-year transition period under the PSSVFO will end 6
Fintech Facilitation Office (FFO) Distributed ledger Big data analytics Facilitate the healthy development of (Blockchain) fintech: Support the sustainable development of the Fintech industry in Hong Kong Promote Hong Kong as a Fintech hub in Asia Protect fintech consumers Keep the public confident in Fintech services and the banking system Payment and Artificial intelligence financing (machine learning) 7
Functions of Fintech Facilitation Office (FFO) Research and application an initiator of industry research in potential application and risks of Fintech solutions FFO Industry Liaison Regulatory interface a platform for exchanging ideas of an interface between market participants innovative Fintech initiatives among key and regulators within the HKMA stakeholders 8
Initiative 1 – Cybersecurity Fortification Initiative (CFI) Cyber Risk Assessment Framework Cyber Threat Intelligence Platform Professional Development Programme Goals: Adopting a more comprehensive approach for looking at cyber risks Providing a more structured framework for assessing cyber resilience Providing more focused training for cybersecurity professionals 9
Initiative 1 – Cybersecurity Fortification Initiative (CFI) • As part of the CFI, a new piece of infrastructure namely the Cyber Threat Intelligence Platform will be developed to allow sharing of cyber threat intelligence among banks in order to enhance collaboration and uplift cyber resilience • We are happy to consider ideas for possible collaboration with other central banks or regulators on cyber intelligence sharing 10
Initiative 2 – HKMA-ASTRI Fintech Innovation Hub A neutral ground where industry-wide Fintech solutions can be developed Users: HKMA, banks, SVF issuers and Fintech solution developers Major functions: Banking industry Computing Holding Training Regtech solutions resources dialogues sessions 11
Initiative 3 – Fintech Supervisory Sandbox ~ by Banking Supervision Department Features: Pilot trials without the need to achieve full compliance with supervisory requirements Benefits With real-life data and user feedback obtained, banks can refine their initiatives Better meet customers’ needs Reduce the risks for formal launch Speed up the rollout of initiatives and reduce the cost incurred 12
FFO’s main function: Research & application Distributed Ledger A one year project, partner with research institute (ASTRI), banking industry and IT industry 1. What is distributed ledger technology? 2. Potential applications in the financial industry 1) mortgage loan application 2) trade finance 3) digital ID management 3. Regulatory implication 13
FFO’s main function: Industry liaison Partners: A series of events: Time Event Participants Fintech O-2-O Meetup 200 people from Fintech-related Jun 2016 (the first Fintech industry gathering on the sectors topic of cybersecurity) An international conference on the risks and 170 people, including global and Jul 2016 opportunities of adopting Fintech solutions regional regulators The first “needs-driven” event in which 10 90 people, including around 70 Aug 2016 Fintech companies presented their solutions representatives from a major to address the needs of a major bank in Hong bank in Hong Kong Kong 14
FFO’s main function: Regulatory interface An interface between market participants and regulators Through regular dialogue with the industry, FFO explains HKMA’s promotional and supervisory work relating to Fintech development 15
Thank You 16
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